Shares of social media on Wall Street lost $ 165 billion ($ 233 billion) in one-day trading after a disastrous earnings warning from Snapchat’s parent company.
Shares of Snap fell more than 40 percent on Tuesday and reached their lowest level since March 2020, just after the COVID-19 pandemic hit the United States.
The company said in a regulatory presentation that its dire outlook is due to the fact that “the macroeconomic environment has deteriorated more and more rapidly than expected.”
Shares of Snap fell more than 40 percent on Tuesday and reached their lowest level since March 2020, just after the COVID-19 pandemic hit the United States. (AP)
News of Snap’s troubles dragged down the actions of many of his rivals.
Facebook and Instagram owner Meta Platforms fell nearly 8%, while Pinterest fell more than 20%.
YouTube and Google’s parent company, Alphabet, fell 5% and the Global X Social Media ETF, which owns shares in all of these companies, fell 8%.
The social downturn slowed much of the general mood of the market. The technology-laden Nasdaq fell about 2.5 percent on Tuesday.
The S&P 500 fell nearly 1 percent and the Dow remained stable.
There are fears that Snapchat will not be profitable as the number of users and ad markets deteriorates. (AP)
Twitter, which may or may not be acquired by Tesla CEO Elon Musk, the deal is currently pending, also down 5%. Shares have dropped nearly 35 percent from the original Musk bid price of $ 54.20 ($ 76) per share.
Investors in social media stocks are clearly nervous that advertisers may be cutting back on marketing spending due to a litany of concerns.
Russia’s invasion of Ukraine has caused oil and gas prices to rise around the world. In addition to rising energy costs, inflationary pressures are also affecting business spending.
The recent rise in COVID-19 cases in China is another worrying sign for businesses and consumers.
Snapchat, in particular, has also been affected by the growing popularity of TikTok and other emerging social networking services that younger users have turned to, such as Discord and Amazon’s proprietary video game streaming platform, Twitch.
The owner of Facebook and Instagram, Meta, was also badly affected, but weakened the sentiment of social media companies. (AP)
Social media companies have been struggling with the negative impact on advertising revenue caused by Apple’s privacy changes for users of iPhone and other devices running the iOS platform.
The advertising landscape also worries analysts.
Wells Fargo analyst Brian Fitzgerald said in a report on Tuesday that “a widespread recession in the advertising market seems increasingly likely.”
JMP Securities analyst Andrew Boone lowered his target price on Snapchat on Tuesday, saying “the advertising environment is getting worse and we don’t have a clear view that this is the bottom line.”
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